E-Z-GO 2000 Annual Report Download - page 57

As discussed in Note 6, the Company recorded an impairment charge of $117 million in the fourth
quarter of 2000 relating to the Company’s investment securities. This charge is included in special
charges, net on the consolidated statement of income.
1998 - 1999 Special Charges, Net
To enhance the competitiveness and profitability of its core businesses, Textron recorded a pretax
charge of $87 million in the second quarter of 1998. This charge was recorded based on the deci-
sion to exit several small, nonstrategic product lines in Automotive and the former Systems and
Components divisions which did not meet Textron’s return criteria, and to realign certain operations
in the former Industrial segment. The pretax charges associated with the Automotive and former
Industrial segments were $25 million and $52 million, respectively. The charge also included the
cost of a litigation settlement of $10 million related to the Aircraft segment. Severance costs were
included in special charges and are based on established policies and practices.
In 1999, the Company reassessed the remaining actions anticipated in the 1998 program and
determined that certain projects should be delayed or cancelled while other provisions were no
longer necessary. Specifically, provisions for severance and exit costs associated with the decision
to exit certain automotive product lines were no longer required due to a decision to build different
products in a plant originally anticipated to be closed. In the former Industrial segment, certain cost
reduction programs in the Fluid and Power Group were suspended as a result of management’s
evaluation of the opportunities presented by the David Brown acquisition. Some smaller programs
were delayed as the Company re-examines strategic alternatives. Others were completed at costs
less than originally anticipated.
Concurrently, in 1999 the Company initiated a series of new cost reduction efforts in the former
Industrial segment designed to significantly reduce headcount from levels at the beginning of the
year. Significant actions included the downsizing of an underperforming plant in Europe and targeted
headcount reductions across most Industrial divisions. Headcount reductions were also effected at
Bell Helicopter.
As a result of the above, the Company reversed approximately $24 million of reserves no longer
deemed necessary for the 1998 program and recorded severance accruals of approximately
$21 million and a charge related to asset impairment of $5 million. In addition, Textron recorded
additional restructuring charges for the Industrial segment, primarily for severance ($7 million) and
asset impairment ($9 million) associated with the announced closing of seven facilities.
During fiscal 2000 the Company utilized the remaining $22 million reserve for severance and
other costs for these programs. As of December 30, 2000, the 1998 and 1999 programs have been
completed and approximately 3,400 employees have been terminated.
An analysis of Textron’s 1998 and 1999 restructuring related special charges and reserve accounts
is summarized below.
Asset Severance
(In millions) Impairments & Other Total
Initial charge $ 28 $ 49 $ 77
Utilized (28) (9) (37)
Balance at January 2, 1999 – 40 40
Additions 14 28 42
Utilized (14) (22) (36)
No longer Required – (24) (24)
Balance at January 1, 2000 – 22 22
Additions – – –
Utilized – (22) (22)
Balance at December 30, 2000 $ – $ – $ –
Included in special charges, net for 1999 is a gain of $19 million as a result of shares granted to
Textron from Manulife Financial Corporation’s initial public offering on their demutualization of the
Manufacturers Life Insurance Company.
The estimated fair value amounts shown in the table on the next page were determined from avail-
able market information and valuation methodologies. Because considerable judgment is required
in interpreting market data, the estimates are not necessarily indicative of the amounts that could
be realized in a current market exchange.
Fair Value of Financial Instruments18
55 TEXTRON 2000 ANNUAL REPORT